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Wednesday, October 16, 2013

Lessons for Small Business from Big Business - Blackberry

Blackberry is in trouble. At one time it was the phone of choice for the corporate world. Even the US president had one. It had excellent email security and integrated well with other business software products.

All that changed with the new generation of phones. Blackberry failed to keep up and saw its market share collapse, even in its niche of choice - corporates. It now seems to be looking for a buyer, but what’s it worth?

It has certain technologies and patents that may be of value to others, but the biggest part of the value for any company purchase is usually the Goodwill for the business as a going concern. Purchases of assets such as patents are pretty much what you get in a fire sale especially as there seems to be little that’s unique in its latest offerings that might appeal to another Telco with its own patents. They may have value to a new entrant.

In contrast, Nokia has merged with Microsoft. They had been co-operating informally for some time. While Nokia had lost some of its gloss, it’s still seen as an innovator by the market, and Microsoft needed a phone of its own to compete with Apple. While still a player, Nokia didn’t have the cash. Microsoft had the cash and software, but didn’t produce hardware. In the PC market, this wasn’t necessary with Windows still dominant and the operating system of choice for computer manufacturers, but in the phone market it wasn’t. Product integration, a key benefit of their software, was not being driven by anyone in the all important phone market. So this seems a good match.

The Goodwill value comes from intangible assets such as the brand, reputation and customer loyalty, and the perceived value from the purchaser’s perspective on how they can leverage that with their own business. No longer standing out from other products, Blackberry has little to sell and the process ends up being a fire sale.

The value of the whole of a business as a Going Concern is of far greater value than the sum of its parts. Owners need to be track the intangible value of their business and re-invest as necessary to ensure that it is maintained. The Goodwill of a business is it’s greatest asset.